Skip to Main Content

How are property taxes assessed?

Every homeowner in Canada pays property taxes.

They are usually assessed every year and owners often see a slight rise, or even drop, in the rates they pay.

The provinces make laws in regards to real estate, however, it’s usually the municipalities of the province that determine and collect the tax, and it serves as a major revenue source.

How municipalities calculate property taxes

Property taxes are a major source of revenue for municipalities. In deciding how much tax to charge, they usually decide how much money they need to bring in for the year.

The property tax is calculated by using the municipal tax rates, both regional and local, the property’s assessed value and the education tax rate.

The British Columbia government also explains that in determining the value of a property, and in order to determine property taxes, the assessor looks as such factors as:

  • Location;
  • Size;
  • Land surface (topography);
  • Shape;
  • Use; and
  • Age and condition of buildings.

The assessor also compares the price of the property to actual sales in the same area.

Though it’s likely that other municipalities in Canada use a similar formula, they may differ.

Why are property taxes calculated in this way?

Generally, municipalities aren’t allowed to run deficits. That means they need a stable source of income and property taxes provide that income for them.

If my property value goes up, does that mean my taxes go up?

Changes in property value usually affect property taxes but only so far as they are relative to the average rise in prices. In other words, your property taxes will only rise if your property value increases at a greater rate then the average.

For example, if the city has to collect $1 billion, and the average house price is $100,000 and if house one in the city is valued at $100,000 and house two is valued at $200,000 and the mill rate (the per cent of a property’s assessed value that gets paid in taxes) is one per cent, then house one would pay $1,000 per year and house two would pay $2,000 per year.

If, a few years later, the average property value in the city has doubled to $200,000 and house one also house doubled in value to $200,000, and house two is now worth $250,000, would their property taxes go up?

House one pays the same amount, as its value has increased at the same rate the value for the average home increased. However, house two would pay a bit less because even though its property value increased, it increased at a rate less than the average.

It’s important to note that different municipalities in different provinces may use different calculations to calculate property taxes for their constituents.

Read more:

Property Assessment British Columbia

Get the basics on property taxes in Ontario